Monday, January 16, 2012

With the specter of a Wal-Mart vs. Safeway showdown over a decade-old exclusivity covenant having receded, the District can get back to resolving the many other issues standing in the way of the Skyland redevelopment in Southeast DC, a top priority of Mayor Vincent Gray’s embattled administration. But can Skyland overcome the many hurdles it faces?

Safeway, one of the District’s top private employers (15 stores), and high-profile retail anchor Wal-Mart squared off in November over an agreement Safeway had entered into with the owners of the shopping center, Skyland LLC, to bar certain types of competitors from the property after Safeway relocated to a nearby shopping center. Each side issued bland statements but retained powerful advisors; Safeway hired Maryland lobbyist Bruce Bereano, famously an ex-fraternity brother of Mayor Gray, and Wal-Mart hired David Wilmot, a local dealmaker who co-hosted a fundraiser with Mayor Gray just last month. Fast-forward a couple of days, and the matter was suddenly settled.

"A covenant exists on one lot of the many that comprise the Skyland redevelopment site," says Nimita Shah, Project Manager in the Office of the Deputy Mayor for Planning and Economic Development (DMPED) by way of clarification. “The District is in discussions with Safeway about the removal of the covenant and anticipates a resolution in the upcoming year. However, it is important to note that the Safeway covenant noted above will have no impact on the proposed Wal-Mart that is to be included in the redevelopment, given that its placement on the site is outside of the affected lot.”

Either no one at Safeway or Wal-Mart actually read the covenant before throwing down their respective gauntlets, or the issue was quietly resolved through backroom horsetrading (the very sort of thing that Gray denounced when he pledged to bring transparency to the mayor's office). At any rate, with this issue put to bed, does this mean that Skyland faces a clear runway to approval and groundbreaking? Far from it.

Since first seizing Skyland in 2005 by invoking eminent domain, the District has spent over $12 million on settlements. Three more tenants settled in 2011 – Hong Kong Inn, Hilltop Cleaners, and New York Fried Chicken – leaving perhaps as few as one holdout, though according to the District there are over a dozen tenants are still operating at Skyland. “Fifteen tenants remain in operation at Skyland," says Shah. “The District is in the process of working will all of the remaining tenants to coordinate their relocations over the upcoming year.”

Everyone out by the end of 2012? Count Elaine Mittleman, an attorney who represents several Skyland tenants, among the skeptics. Mittleman contends the eminent domain proceedings have been slipshod and disorganized. “Wild ineptitude,” Mittleman snaps when asked to characterize the District’s handling of Skyland. Mittleman also provided DCMud with extensive correspondence between herself and the District that seems to raise questions about who holds the titles to seized Skyland properties, as well as concerns about the eventual turnover of Skyland to private developers, one of whom is a close associate of Mayor Gray’s, and has done repairs at his home.

Serious questions also remain regarding the project itself. There’s no firm consensus on whether Skyland is in fact a viable site for redevelopment; critics have pointed to the lack of public transportation options (the nearest Metro station, Anacostia, is a mile and a half away) and an already dicey traffic situation. There are also multiple competing projects in Southeast – St. Elizabeths East, Poplar Point, and Kenilworth-Parkside, just to name a few - as well as another Walmart planned nearby, on East Capitol Street. In the face of these doubts, the conventional wisdom is that with millions and years spent and so many promises made – none more than by the present administration - the District can hardly back out now.

Or can it?

People who point to the 2005 Supreme Court ruling that empowered the city of New London to oust intransigent homeowners so they could build a Pfizer plant as proof that Skyland is all but inevitable, overlook the fact that the Pfizer plant was never actually built. The drawn-out process of settling with and vacating tenants, as well as appeals and the administrative labyrinth of state seizure of property, can often outlast the patience of prospective tenants. Before Wal-Mart agreed to anchor Skyland, a similar Target deal fell through. Who's to say Wal-Mart won't walk, if litigation drags on for another year or three? Is Mayor Gray prepared to

Some cite the possibility that the District's resolve on Skyland is, at least in part, opportunistic. If it comes together, it will be a victory for some mayor's scorecard. But if it doesn't, that mayor (like the last three) can still curry favor with the voters of Southeast by telling them he tried. In fact, the prospect of a mayor fighting the good fight on behalf of the city's least-served quadrant, only to be stymied by other forces, is arguably a more valuable asset in a general election than a mere shopping center, however big and shiny. But the Mayor has been personally advancing the cause of Skyland to private businesses that might have a stake in the proposed development.

Elaine Mittleman disagreed with this cynical view of things – with conditions. Mittleman believes that the District sincerely wants Skyland, and wants it badly, but just got in over their heads. “The District courts rubber-stamped everything, basically, and there was never any comprehensive plan, just a back of the envelope thing,” Mittleman says. “It seems like they have just not put in the proper effort. It seems like they just magically thought it would happen.”

For their part, lead developer The Rappaport Companies, who won rights to Skyland way back in 2002, doesn’t seem the least bit perturbed by these latest developments, either stoically patient or just resigned to sticking it out for the long haul.
“The Skyland project is definitely gaining momentum, and the Mayor has made this a priority,” said Sheryl Simeck, Vice President of Marketing and Communications at Rappaport. “But it is still too early in the process for us to be able to supply construction dates," (despite Mayor Gray's prediction it would break ground last year.) "The District continues to work on resolving the outstanding legal issues involving eminent domain. Development cannot start until these last few issues are resolved.” At this time, no one is prepared to say when that will be.

Washington D.C. real estate development news

13
comments:

Anonymous
said...

It's one thing to post filtered and altered photos when the entire post is photos, but it's becoming somewhat annoying and unrepresentative to show edited photos with actual articles.

Thanks for the feedback. I appreciate that you would do things differently, and that we don't do things like everyone else, but sometimes being different is okay. Its a prerogative we have exercised in the past and will continue to do so.

Lets focus on St E's East
said...

Thanks for the Skyland story. It is a sad one indeed. I'm curious (maybe I need to re-read) Are the last holdouts just being greedy? Or is it the anti-gentrification idea?

Thw Wal-Mart planned on East Capitol is not "nearby"/near Skyland. It is at the intersection of 58th & East Capitol St NE, literally on the other side of the city from Skyland. This is the second major geographic faux pas I've seen on this site in the past few days. You all should either hire a copy editor or spend more time getting to know the area before you post here.

Anonymous
said...

Litterally on the other side of the city? Really? Its not even 5 miles not the other side of the city.

I agree with "Anonymous". On an article that's so newsy and that's discussing a currently down-on-its-luck shopping center, isn't it a bit over the top to include only photos digitally enhanced to make the property appear MORE dingy?

Anonymous
said...

Anonymous (2nd), the District is only 10 miles across on angled edge, or 14 miles across from the absolute furthest points (bottom tip of Bolling to Silver Spring).

5 miles is the distance from Georgetown to the Anacostia River, or the distance of Falls Church to the White House.

In a dense urban environment, 5 miles IS "the other side of the city"

Anonymous
said...

Meanwhile residents of Hill East have been begging Gray to allow development of Reservation 13 to proceed -- on land that's already city owned and using a plan the community already signed off on. All literally surrounding a metro station that is completely underutilized. And neither Gray nor his bunch of inept aides can give us a straight answer as to when the long-planned development will begin. We've elected a total incompetent as mayor.

Shawn
said...

1st Anonymous is dead on. Ken, doctoring the photos to make this property appear even more run down is misleading at best. But go on with your prerogative.

I'm not sure what all of you are talking about. The enhanced photos look better than the real Skyland. Open your eyes! Skyland has been a dump for ages. Let someone else deal with it. The area is doomed IMO...

Again I'd like to clarify that we didn't "doctor" the photographs or attempt to portray it negatively. The editing of the photographs was done by the photographer as an artistic touch. You are free not to like it, but it was done without knowledge of what the story would be.

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Ken is a real estate agent in Washington DC, Maryland, and Virginia, as well as founder and editor of DCMud. Ken specializes in marketing urban properties and helping identify and analyze property. You can reach him at 202-588-1408, or Ken @ DCRealestate.com

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